The borough could receive about $300,000 under a Senate Finance Committee plan to pay back municipalities across Alaska for years of short-funding of the state’s share of local school construction bond debt.
The committee version of the state budget includes $221 million to pay back municipalities for incomplete state reimbursement payments going back five years.
Years of low oil prices and large state budget deficits prompted governors to short-fund the reimbursements, with legislators lacking enough votes to override budget vetoes. This year’s $100-plus oil prices are swelling the state treasury, with legislators and the governor looking to share the wealth with Alaskans and communities in an election year.
State law provides that the Legislature will cover 60% to 70% of a municipality’s annual bond debt repayments for school construction and major maintenance projects approved by voters before 2015, when the Legislature imposed a moratorium on payments for new projects to reduce the state’s ongoing and future expenses.
Wrangell voters approved the community’s last school bonds more than a decade ago, and the borough paid off the last of the debt in 2021. If the Legislature approves the Senate Finance Committee proposal, Wrangell could receive a one-time payment of about $300,000 to make good on the share that the state owed — but did not pay — on the bonds in fiscal years 2017, 2020 and 2021.
The funding package is part of the operating budget for the state fiscal year that begins on July 1.
The Senate Finance Committee has yet to vote on the budget bill, which would go before the full Senate for consideration and then to the House for review of the Senate changes. Legislators face a May 18 adjournment deadline to adopt a budget for submission to the governor for his signature or vetoes.
The big winners if the Senate committee proposal goes through would be Anchorage and the Matanuska-Susitna Borough, which would receive tens of millions of dollars to make up for partial state payments in past years. In particular, the Mat-Su Borough, with the fastest-growing population in the state, borrowed heavily to build new schools in the past decade.
Then-Gov. Bill Walker vetoed about 25% of the state’s share of school debt reimbursement for fiscal year 2017, as oil prices were one-third of what they are today and the state faced large budget deficits.
Gov. Mike Dunleavy vetoed half of the state’s contribution to local school debt for fiscal year 2020, his second year in office, as he shifted more expenses from the state to municipalities.
“There’s no easy way out of this,” Dunleavy said of his decision to veto the spending for fiscal year 2020. “Whether the PFD is taken and the impacts that will have on 680,000 individuals and families statewide, whether it’s taxes, whether it’s reductions. I think everyone realizes that there’s no easy way out of this or we would have found the easy way. But I believe that the communities are going to have to make the decision on how they’re going to deal with that.”
The governor vetoed 100% of the state spending the next year.
The budget currently before the Legislature for next year includes full funding for the reimbursement program, though it doesn’t matter to Wrangell which has paid off all of its school bonds.
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